The Central Bank of Nigeria (CBN) yesterday raised N256 billion in six-month treasury bills, N206 billion more than it had planned to issue, and at a higher yield of 18 per cent to soak up naira liquidity and attract foreign investors back to the country.
The move has led to increase of the interbank overnight lending rate from 10 per cent to 23 percent.
Traders said commercial banks were paying for treasury bill purchases and a foreign currency intervention, thereby reducing the amount of naira in the banking system. The central bank has been offering treasury bills at high rates to attract offshore flows into Nigeria, which has been hit by the fall in oil prices, prompting foreign players to flee bond and equities markets.
It has also been selling hard currency almost on a daily basis. “The central bank is trying to drive the economy with bills and bonds that they are offering securities at such high yields,” one trader said.
Nigeria has been battling with economic crisis, as a slump in oil revenues hammers public finances, causing chronic dollar shortages and triggering a contraction in the economy. The CBN governor, Mr. Godwin Emefiele, said recently that a recession is likely in the country.
The CBN also intervened on the currency markets after the naira hit an all-time low of N353.75 on the interbank market on Friday. By close, the naira was trading back at 310. The currency has been hitting new lows since this week.
Traders say banking system liquidity has been in debit for more than a week as the central bank continues to drain cash to support the currency.
But it opened with a credit of 84 billion naira on Friday due to treasury bill maturities, they said.
Meanwhile, the Central Bank of Nigeria (CBN) has said henceforth, if commercial banks continue to sack its staff up to a significant number, they would be made to give prior notice and reasons to the apex bank before such actions are taken.
Kolawole Balogun, a representative of the CBN, said this while speaking at an interactive meeting in Abuja with Chris Ngige, minister of labour and employment, and other stakeholders in banking and finance sectors.
He explained that the banks should be able to make profit with a reasonable amount of staff.
He said, “We have looked at our laws in terms of our limitations. In as much as we cannot impose staff on any bank, we can engage them on other solutions and that is what we are doing now. We have even gone a step further to look at how we can, not in terms of regulation but in terms of knowing why they are actually disengaging their staff.
“We will soon come up with a circular for the banks to ensure that if they are going to disengage up to a certain number of staff they should let us know and explain why. Although times are challenging at the moment, they can still manage to keep some level of their staff and remain profitable”.
On his part, the minister of labour and employment, Ngige said the commercial banks must obey the country’s labour laws.
His words: “You must obey all laws of the land, including labour laws, such as the Trade Union Act, T14 law of the federation concerning redundancy and the Trade Dispute Act, which deals with the management of trade disputes including employee-employers’ relationship.
“The ILO takes very seriously the issue of workers maltreatment in various guises, be it in the industries, construction sites or public service. Workers should be treated with dignity and decency.”
Meanwhile, efforts by the federal government to diversify the economy away from crude oil yesterday received a major boost, as the Nigeria Sovereign Investment Authority (NSIA) and Anglo-South African financial services firm, Old Mutual Investment Group (OMIG), signed a $700 million partnership agreement to set up two funds for investments in real estate and agriculture.
The agreements, signed in Abuja, consist of $500 million real estate co-investment vehicle between NSIA and OMIG, and a $200 million agriculture co-investment vehicle between NSIA, OMIG and UFF Agri-Fund, (UFF is the agriculture management company of Old Mutual Investment Group).
Under the real estate agreement, the objective is to invest $500 million in commercial, retail and hospitality assets.
The Vehicle is expected to have initial commitments of up to $100 million each from NSIA and Old Mutual and is targeting a total commitment size of $500 million with deal origination and execution to be undertaken jointly by both parties.
For agriculture, both parties will make commitments for an initial special-purpose vehicle size of $50 million ahead of the targeted size of $200 million with deal origination and execution to be undertaken jointly by NSIA and UFF Agri-Fund.
The aim of the agreement is to improve food security and promote rural economic development to capitalise on the growing opportunities that the Nigerian agricultural industry provides.
NSIA and OMIG’s interest in the real estate and agriculture sectors is underpinned by a shared vision of the significant opportunities presented by both sectors, given a number of advantageous socio-economic trends prevalent in Nigeria. Speaking during the official signing,
Speaking at the event, the Minister of Finance, Mrs Kemi Adeosun said today’s ground-breaking announcement between the NSIA and OMIG of South Africa, marks a critical milestone towards delivering on NSIA’s broader mandate to invest in key sectors of the Nigerian economy.
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“It is consistent with the administration’s concerted efforts to diversify the Nigerian economy away from oil and attract investments into other core sectors which can stimulate sustainable growth”, he added.
While commenting on the significance of the agreement, the managing director & CEO NSIA, Uche Orji said, “We believe that the real estate and agriculture sectors offer considerable potential for economic growth in Nigeria. Our commitment in these sectors is underpinned by economic imperatives of urbanisation, population growth and enhancement of liquidity for the sectors.